Back to school a test for retailers focused on teens

Shoppers made their way between stores on Fifth Avenue in New York in July. The back-to-school shopping season accounts for 25 percent of annual revenue for merchants catering to teens.
Shoppers made their way between stores on Fifth Avenue in New York in July. The back-to-school shopping season accounts for 25 percent of annual revenue for merchants catering to teens. AP

NEW YORK — Teens are heading back to school, but it's the retailers catering to them that are getting the first test.

They're hoping their expanded selections of funky T-shirts and hip-hugging jeans will attract students like Dale Gibson, 15, who struggles to find trendy clothes in their stores. Ditto for Danielle Martinez, 14, who thinks their merchandise is dull. Same goes for Rochelle Wilson, 19, who stopped shopping them altogether.

"All the clothes seem the same," said Wilson, a native of Pembroke Pines, Fla., who prefers shopping at H&M. "There's nothing to make people say, 'Oh wow, where did she get that from?'"

The "Big Three" teen merchants Abercrombie & Fitch, Aeropostale and American Eagle once defined fashion for fickle teens. But they lost their mojo by not stocking the jeans and tees that their customers covet. So teens flocked to H&M and Forever 21, chains that cater to twenty-somethings with up-to-the minute trendy styles that they can mix and match. Now, as the down economy batters teens and their parents, teen clothing chains are having mixed success as they try to lure young people back into their stores by offering more of the things they love — boot-cut jeans, fleece bottoms and accessories.

Teen merchants depend on the back-to-school season, the second-biggest shopping period of the year behind the winter holidays, because during that time they can make up to 25 percent of their annual revenue. This year, the average family is expected to spend about $603.63 during the back-to-school season, which runs from mid-July through mid-September. That amount is down slightly from $606.40 last year, according to the National Retail Federation. And spending in teen stores accounts for about 19 percent of the $85.8 billion in annual revenue generated from families' spending on clothes.

But teen clothing sellers, which had routinely posted strong sales gains for a decade or more, have had a tough time since the recession began in 2007. One challenge is that their core customers have been pummeled by the economy: Teens have record high unemployment: about 25 percent compared with the overall unemployment rate of roughly 9 percent. Adding to that, their parents, who give them allowance money, have been hit with a combination of stagnant wages and higher costs.

Michelle Scott, from New York, says she has cut nearly in half the amount she's spending this year on school clothes for her 15-year-old twins, to $250 apiece, because her household budget is being stretched. "Rent just went up, the cost of living is different, food went up, clothes went up," she said.

To get its customers back, Abercrombie, which runs its namesake Abercrombie & Fitch and surf-themed Hollister stores, has made its assortment trendier, lowered its prices and cut costs. That meant adding jackets and sweaters with faux fur collars and offering jeans with various types of stitching and embroidery.

The strategy has paid off. The chain reported that second-quarter revenue at stores open at least one year rose by 9 percent — its sixth straight quarterly increase.

American Eagle Outfitters, which offers preppy clothes with lots of plaid flannel shirts and blazers, also is turning in encouraging results after three straight years of revenue declines in stores open at least a year. The chain had gone wrong by offering too broad a selection, leading to too little inventory of its most popular items — particularly jeans. Now, the chain has more T-shirts and fleece pullovers and has expanded its jean selection with new hip-hugging jeans that ride low on the waist and flare at the leg.

There are some early signs that the revamp is working. American Eagle reported that its second-quarter net income more than doubled, helped by a 4 percent increase in revenue and fewer markdowns. But revenue in stores open at least one year, the key measure, was flat.

Although its competitors are getting back on track, Aeropostale, known for low-priced basic T-shirts and jeans, continues to struggle. The chain, which benefited during the recession because it had lower prices than other teen clothing stores, lost its way with a series of fashion faux pas. As a result, the company has recorded three straight quarters of sales declines after years of positive results during the recession. In the second quarter, it posted a 14 percent decrease.

Aeropostale said it miscalculated its women's business last year, offering too many items in dark grey and brown. It also didn't stock enough items that are popular with girls.

Now, the chain is offering more accessories and broadening its selection of clothing by adding more dorm-wear, including fleece bottoms for girls, and expanding its selection of boys' clothes.

The chain has made improvements, but chief executive Tom Johnson said Aeropostale needs to add trendy clothes along with its basics. And although results were weak for the quarter, Johnson said the clothing store has gone back to being a "fun, inclusive and parent-friendly brand offering our teen customer the best mix of fashion and basics at compelling prices."

But for Martinez, 14, it might be too late. She says she stopped going to Aeropostale last year because she thought the clothes were "plain and dull." She prefers wearing clothes with "lots of color."

"It makes you feel happy," said Martinez, who for now prefers going to Forever 21. "I like the type of skirts they have, with flowers and butterflies; they're colorful."